Industries

Have you seen IBM’s commercial for Watson, an artificial intelligence (AI) supply chain management tool? When we start seeing ads for supply chain strategies during the season premiere of our favorite show, we know changes are coming for the market.

AI isn’t just for creating personalized ads weaved in your social media feeds. And your supply chain isn’t just for fulfilling orders. Both work to increase sales, reduce overhead and overall improve the customer experience. Supply chain management software companies see the connection and are quickly working to expand AI-supported features.

These features go beyond predictive data analysis (although, that’s a key offering) and will soon change the physical ways supply chains operate. For example, industry expert, Bernard Marr, explains that for manufacturing, AI “is used to manage workforces and production processes as well as for predicting faults before they occur, therefore enabling predictive maintenance.”

Small to midsize businesses (SMBs) are well positioned to adopt supply chain AI, largely because the smaller scale means operations can adapt swiftly and often aren’t weighed down by massive, legacy systems. To keep up with consumers’ more demanding expectations of retailers, SMBs need to prepare to adopt AI into every day processes in order to stay competitive.

Here’s what we’ll cover:

Why Is Artificial Intelligence Important to Me?

Artificial intelligence aides us in many aspects of our lives—from voice-activated assistants such as Amazon’s Alexa to mobile apps that provide driving directions for the optimal route. The experience your customers have with technologies such as these influence their expectations on their experience with your business.

EXAMPLE: Many of us have come to expect the Waze mobile app to generate the fastest route based on real-time traffic, weather conditions and other events that impact travel times.

Our daily interactions with technology such as this influence expectations of customer service across all brands. This means your customers want an easy returns process, accurate delivery times and visibility into stock levels. The good news is supply chain management software is rapidly evolving to incorporate AI and the market options are growing each year.

Market Impact:Reportlinker.com reports that artificial intelligence in the supply chain market is likely to grow at a compound annual growth rate (CAGR) of 45.55% between 2018 and 2025. This will push the numbers over a billion USD annually, with the majority of the increase seen in supply chain software.

What Happens If I Ignore Supply Chain AI?

Reactive inventory management hurts customer service and your bottomline, but artificial intelligence can be your ally against stockouts, sluggish fulfillment and ultimately losing customers to more tech-savvy competitors.

EXAMPLE: Let’s take last year’s Black Friday weekend as an example of when poor inventory planning negatively affected customer service and resulted in missed sales.

Adobe Analytics reported that the 2018 Cyber Monday generated a new record in online sales. But they also reported that over the Thanksgiving through Cyber Monday weekend, 2.8 percent of product page views saw an “out of stock” message. This resulted in an estimated $484 million worth of missed sales.

Brand loyalty and your marketing campaign drive customers to your site, but these efforts can backfire if your customer leaves your site without the purchase they were hoping for. The right supply chain management software will inform your inventory planning so you can avoid stockouts in this year’s biggest sales weekend of the year.

How Do I Prepare For These Changes?

Focus on your current processes and see where customer service improvements can be made in the near term.

Gartner recently published a report, “The Digital Shakeout: Supply Chain’s Critical Role in the Fight for the Consumer”, which recommends supply chain executives take a fresh look at ways to innovate their processes to ensure they are delivering what the customer wants and when to drive loyalty to your brand. (Full report available to Gartner clients only.)

“Specifically, for the supply chain, a retailer can use effective service delivery (e.g., product availability, online fulfillment and returns management) to increase the likelihood that consumers will keep shopping with the organization, thus growing their overall lifetime spend.”

This approach is directly related to the reasons I made when explaining why AI is important to your supply chain. AI provides consumers with driving directions, entertainment and advertising, so it’s inevitable your customers will expect the same service from your business.

Still not convinced of AI’s impact on consumer behaviors? Check out these numbers from a recent Gartner survey:

Source: Gartner (January 2019)

Our Recommendations

Take a bold step and evaluate the feasibility of leveraging AI to improve your current processes in order to scale and prepare to be competitive in the evolving market changes.

Meet with the key stakeholders from customer service, inventory management and transportation management to discuss where in your current and future processes AI could be beneficial.

Ask the marketing team if they are currently using or planning to use AI for their efforts. It’s possible you both are in the market to integrate AI into your areas and can do so in a cohesive and possibly cost-saving way.

Evaluate your technology needs to support the drive toward using AI. For example, the trend for technology is to move to the cloud and therefore the strongest AI-enabled solutions will be cloud-based. Partner with your head of IT to discuss the feasibility of a move such as this.